Climate Border Adjustments and WTO Law, Ulrike Will develops a convincing reform proposal for a climate border adjustment (BA) on imports within the EU Emission Trading System (ETS). The proposed framework offers a realistic approach which would be immune to disputes at the WTO and comply with international climate agreements while remaining economically feasible and straightforward to implement.
The book offers a comprehensive analysis of the WTO cases that might have parallels to the unresolved case of BAs. It provides interpretations of vague legal terms of the applicable WTO agreements and guidance on how to balance between environmentally related and trade liberalising WTO rules. Typified constellations of BAs pave the way for a reform of the EU ETS Directive.
The inclusion of legal findings in the context of economic theory and climate science allows for a meaningful discussion of the functioning of the BA, relevant markets and competitive effects of specific design proposals. The proposed framework also takes into account the prevention of extra-jurisdictional effects.
Ulrike Will, Ph.D. (2018) European University Viadrina Frankfurt (Oder), Germany, is a Researcher in the project “Incentives, Fairness and Compliance in International Environmental Agreements” (InFairCom) at the Leipzig University of Applied Sciences in Germany.
Table of contents
AcknowledgmentsList of AbbreviationsList of Figures and Tables 1
The EU Emissions Trading System Leading to Carbon Leakage Effects 2.1 United Framework Convention on Climate Change, Kyoto Protocol and Paris Agreement 2.2 EU Emissions Trading System (ETS) 2.3 Carbon Leakage Effects and Competitive Disadvantages 2.4 Current Approaches to Carbon Leakage in the EU 2.4.1 Export Rebates and Carbon Leakage List 2.4.2
The Extension of the EU ETS to International Flights 2.4.3
Proposal for an Import BA for Cement and Clinker 2.5 Result: The Need for an Import Carbon Leakage Policy 3
Trade Measures to Resolve the Carbon Leakage Problem 3.1 Measures between Trade Liberalisation and Trade Restriction 3.2 Committee on Trade and Environment 3.3 Doha Round and Environmental Goods Agreement 3.4 Unilateral Instruments 3.4.1
Import Ban, Quota and Standard 3.4.2
Carbon Tariff 3.4.3
Border Adjustment (BA) and the Integration into the EU ETS 3.4.4
Linking the EU ETS with other ETSs 3.5 Climate-Related Trade Instruments within Preferential Trade Agreements 3.5.1
Recognition and Harmonisation of Climate-Related Standards 3.5.2
Conditional Tariff Policy 3.5.3
A Common Border Adjustment 3.5.4
Linking the EU ETS with Other ETSs 3.6 Result: Unilateral BA for the EU ETS 4
Structuring the BA in the WTO Context 4.1 Focus on Imports 4.2 Aims 4.3 Interests 4.4 Effects 4.5 Provoking or Avoiding WTO Disputes? 4.6 The Multiple Legal Nature of ETS, BAs and Certificates 4.7 The Impact of International Climate Agreements on WTO law 4.8 Result: BA on Imports Complementing the EU ETS 5
and BA Restricting Trade in Goods 5.1 Measures at Issue: ETS and BA as Complementary Measures 5.2 Constellations of Discrimination 5.3
and BA as Domestic Fiscal Measure 5.3.1 BA as a Charge Equivalent to an Indirect Tax 5.3.2 ETS and BA as Fiscal Measure 5.3.3 BA Not Charging Foreign Products in Excess of Domestic Like Products 5.3.4 Taxing Foreign Products Similarly Compared to Competitive EU Products 5.4 BA as Domestic Non-Fiscal Measure 5.5 BA as a Restriction on Market Access 5.6 Different BAs for Different Countries and the Most-Favoured Nation Treatment 5.6.1 Advantage 5.6.2 Like Products 5.6.3 Advantage Accorded Immediately and Unconditionally 5.6.4 Exceptions for Developing Countries (Enabling Clause) 5.6.5 Exceptions for Preferential Trade Agreements 5.7 How to Avoid Restrictions of Article III GATT 5.8 ETS and BA as Climate Measures under the General Exceptions 5.8.1 Climate-Related Concerns the
and BA Seek to Protect 5.8.2 Regulatory Autonomy for Climate Policy 5.8.3 Necessity Test 5.8.4 ‘Relating to’ Requirements 5.8.5 Exclusion of Disguised Discrimination 5.8.6 Limiting Extra-Jurisdictional Effects 5.9 How to Avoid Restrictions of Article XX GATT 5.10 Notification and Transparency 5.11 Result: BA without Emissions-Based Product Distinctions 6
and BA Implying Technical Regulations or Standards 6.1 Measures at Issue: ETS and BA as Complementary Measures 6.1.1 Technical Standards 6.1.2 Technical Regulations 6.2 Constellations of Discrimination and Restriction 6.3 Climate-Related Concerns the ETS and BA Seek to Protect 6.4 Necessity Test 6.5 Non-Discrimination of Foreign Products 6.5.1 Like Products 6.5.2 Treatment No Less Favourable and Exclusion of Disguised Discrimination 6.6 Limiting Extra-Jurisdictional Effects 6.7 Notification and Transparency 6.8 Technical Assistance 6.9 Special and Differential Treatment of Developing Countries 6.10 Result: Product-Based BA Complying with the TBT Agreement 7
and BA Affecting Trade in Services 7.1 Measures at Issue: ETS Alone or ETS and BA as Complementary Measures 7.2 Constellations of Discrimination and Affected Services 7.3 EU Schedule of Commitments in the Relevant Sectors 7.4 Restriction of Environmental Services 7.5 Restriction of Financial Services 7.5.1 The EU Schedule and Financial Services 7.5.2 Exclusion of Foreign Certificates as Market Access Restriction 7.5.3 National Treatment of Foreign Certificates 7.5.4 Most-Favoured Nation Treatment of Non-Kyoto Certificates 7.6 Restriction of Aviation Services 7.6.1 Chicago Convention Relevant for the EU? 7.6.2 Jurisdiction 7.6.3 The GATS Annex on Air Transport Services 7.6.4 Inclusion of International Flights into the EU ETS Providing Full Market Access? 7.6.5 Treating Foreign as Favourably as EU Flights? 7.6.6 Comparison between Non-Kyoto States and Kyoto States 7.7
and BA as Climate Measures under the General Exceptions 7.7.1 Climate-Related Concerns the
and BA Seek to Protect 7.7.2 Necessity Test 7.7.3 Exclusion of Disguised Discrimination 7.7.4 Limiting Extra-Jurisdictional Effects 7.8 Participation of Developing Countries 7.9 Transparency 7.10 Result: Recognition of Foreign Certificates that Contribute to Climate Protection 8 Reform Proposal for an Import BA for the EU
8.1 Emissions-Based Approach: Integration into the EU
8.1.1 Measurement, Calculation 8.1.2 Necessary Reforms of the EU
8.2 Price-Based Approach: BA Equivalent to the Restriction of the
Per Product or Service 8.2.1 Measurement, Calculation 8.2.2 Necessary Reforms of the EU
8.3 Simplifications and Exemptions 8.3.1 Limitation of Sectors 8.3.2 Threshold 8.3.3 Foreign Climate Policies 8.3.4 State of Development 8.4 Use of Revenues from the BA 8.5 Moment of Adjustment 8.6 Result: Price-Based Import BA for the EU
Trade lawyers, environmental lawyers, practitioners involved in the reform process of the EU ETS Directive, economists, and political scientists doing interdisciplinary research on climate protection and international trade.